Key Findings Details

Does Eliminating the Earnings Test Increase the Incidence of Low Income among Older Women?Theodore F. Figinski and David Neumark
WP 2015-325

• The elimination of the retirement earnings test (RET) beyond the Full Retirement Age (FRA), in 2000, was intended to boost employment of those in this age range. But the elimination of the RET makes those who are working more likely to claim Social Security benefits at earlier ages, reducing benefits in the longer-run. This latter effect could lead to lower family income (including benefits) at older ages – perhaps in particular for older women who are likely to outlive their spouses.
• We confirm past findings that the elimination of the RET led to earlier claiming of benefits for women, and hence lower benefits.
• We find evidence that the elimination of the RET is associated with higher incomes and hence of lower incidence of low family incomes initially – when women are around age 70 – but higher incidence of low income as women reach their mid-70s and beyond.
• These findings raise cautionary flags about proposals to reduce or eliminate the RET between ages 62 and the FRA.